Strong U.S. sales help Cisco beat estimates

Arathy S Nair, Anya George Tharakan

3 Min Read

The Cisco Systems logo is seen as part of a display at the Microsoft Ignite technology conference in Chicago, Illinois, May 4, 2015. REUTERS/Jim Young

(Reuters) - Network equipment maker Cisco Systems Inc (CSCO.O) reported higher-than-expected quarterly revenue and profit as strong demand for its products in the United States more than offset weakness elsewhere.

Shares of Cisco, considered a bellwether for the performance of the broader network gear industry, rose nearly 4 percent in extended trading on Wednesday.

The company is the market leader in selling network equipment to businesses, controlling about half of the $38 billion global market and overshadowing rivals Hewlett-Packard Co (HPQ.N) and China’s Huawei Technologies Co Ltd HWT.UL, according to market research firm Gartner.

Cisco’s latest results also underscore an ongoing recovery in sales of the company’s switches and routers, which were hit by a slowdown in spending by telecom carriers, its traditional customers, in the second half of 2014.

Needham & Co analyst Alex Henderson said the 7 percent rise in revenue in the Americas was a “laudable performance.” The region accounted for 61 percent of total sales in the fourth quarter.

“I think for the entire market - and Cisco is a microcosm of it - the international markets are the key issue.”

Cisco said revenue from other geographies declined marginally.

The company has also been investing in new products and services such as data analytics software, security and cloud-management tools.

Cisco said in June it would buy cloud-based security firm OpenDNS for $635 million.

The company also said revenue from telecom providers rose 2 percent in the quarter but added that it did not expect an increase in capital spending by its traditional customers.

“Cisco’s best years are ahead of us,” Chuck Robbins said on the post-earnings conference call, his first as Cisco’s chief executive. Robbins took over from veteran John Chambers in July.

The company forecast revenue growth of 2-4 percent for the first quarter, which translates to $12.49 billion-$12.73 billion. It forecast adjusted earnings per share of 55 cents-57 cents.

Analysts on average were expecting revenue of $12.55 billion on a profit of 56 cents per share.

For the fourth quarter, the company earned 59 cents per share on an adjusted basis, while revenue rose nearly 4 percent to $12.84 billion.

Analysts on average were expecting a profit of 56 cents per share on revenue of $12.65 billion, according to Thomson Reuters I/B/E/S.

Up to Wednesday’s close of $27.90, shares had fallen nearly 5 percent since the company last reported results in May.

Reporting By Arathy S Nair and Anya George Tharakan in Bengaluru; Editing by Saumyadeb Chakrabarty